Brookfield Corporation(BN) - 2023 Q2 - Quarterly Report

Financial Highlights and Corporate Overview Brookfield Corporation reported strong first-quarter 2023 financial results, driven by the growth and resilience of its diverse businesses, with distributable earnings before realizations increasing 24% Overall Performance Summary Brookfield Corporation reported strong first-quarter 2023 financial results, with distributable earnings before realizations increasing by 24% year-over-year, reflecting the growth and resilience of its diverse businesses - Brookfield Corporation announced strong financial results for the quarter ended March 31, 2023, supported by the growth and resilience of its businesses[9][14] - Distributable earnings (DE) before realizations increased by 24% compared to the prior year, after adjusting for the special distribution of 25% of the asset management business completed in December last year[14] - Operating businesses demonstrated resilience, generating stable and growing recurring cash flows, with strong growth in Operating FFO across infrastructure, renewable power & transition, and private equity, and same-store net operating income (NOI) growth in real estate[12] Key Financial Metrics For the first quarter of 2023, Brookfield Corporation reported net income of $424 million, with distributable earnings before realizations of $945 million and adjusted DE per share of $0.59 | (US$ millions, except per share amounts) | 2023 (Q1) | 2022 (Q1) | 2023 (LTM) | 2022 (LTM) | | :--------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Net income | 424 | 2,960 | 2,659 | 11,572 | | Distributable earnings before realizations | 945 | 947 | 4,312 | 3,674 | | Adjusted for the special distribution | 945 | 824 | 3,946 | 3,183 | | Per Brookfield share (adjusted) | 0.59 | 0.51 | 2.46 | 1.98 | | Distributable earnings | 1,157 | 1,182 | 5,204 | 4,957 | | Per Brookfield share | 0.72 | 0.73 | 3.25 | 3.09 | - Net income in the first quarter was $424 million[15] - Distributable Earnings Before Realizations increased by 24% to $4.3 billion over the last twelve months[22] - Earnings from realizations of mature assets were $212 million for the quarter and $892 million for the last twelve months[4] Regular Dividend Declaration Brookfield's Board of Directors declared a quarterly dividend of $0.07 per share, payable on June 30, 2023, along with regular preferred share dividends - The Board declared a quarterly dividend for the Corporation of $0.07 per share, payable on June 30, 2023, to shareholders of record as at the close of business on May 31, 2023[16] - The Board also declared the regular monthly and quarterly dividends on its preferred shares[16] - Information on dividends can be found on the company's website under Stock & Distributions/Distribution History[78] Operating Segment Performance Brookfield's operating segments demonstrated robust performance, with asset management growing 15%, insurance solutions significantly increasing earnings, and operating businesses achieving 25% earnings growth Asset Management Business The asset management franchise achieved 15% growth compared to the prior year quarter, driven by robust fundraising and deployment activities, with fee-bearing capital increasing by 14% to $432 billion - Asset management franchise delivered 15% growth compared to the prior year quarter, benefiting from strong fundraising and deployment[29] - Distributions from the asset management business were $678 million in the quarter and $2.9 billion over the last twelve months, a 15% increase from the prior year quarter[31] - Fundraising led to inflows of $19 billion year-to-date and $98 billion over the past twelve months, with fee-bearing capital reaching $432 billion, an increase of $53 billion or 14% over the last twelve months[31] Insurance Solutions Business The insurance solutions business generated $145 million in distributable operating earnings for the quarter, maintaining a 5% average investment portfolio yield on $45 billion of assets, targeting $800 million annualized earnings by year-end - Insurance solutions business generated distributable operating earnings of $145 million in the quarter and $520 million over the last twelve months, significantly higher than comparative periods[24] - The average investment portfolio yield was 5% on approximately $45 billion of assets, supporting liabilities with an average cost of 3%[24] - The acquisition of Argo Group, expected to close in the second half of this year, will further diversify and add approximately $4 billion of assets to the franchise, with annualized earnings projected to reach $800 million by the end of 2023[24] Operating Businesses (Infrastructure, Renewable Power & Transition, Private Equity, Real Estate) Distributions from Brookfield's operating businesses amounted to $304 million for the quarter, with infrastructure, renewable power, and private equity collectively achieving 25% earnings growth, and real estate showing 5% NOI growth - Distributions from operating businesses were $304 million for the quarter and $1.5 billion over the last twelve months[10] - Infrastructure, renewable power & transition, and private equity businesses achieved 25% earnings growth in aggregate[10] - Real estate business's operating FFO was impacted by higher interest rates, but underlying operating performance remained strong with 5% growth in NOI of prime retail and office assets[10] Financial Position and Capital Management Brookfield maintains a conservatively capitalized balance sheet with a 12-year weighted-average term, $13,049 million in cash, and $113 billion in group-wide liquidity, returning $404 million to shareholders in Q1 Balance Sheet Overview Brookfield maintains a conservatively capitalized balance sheet with a weighted-average term of 12 years and no maturities until 2024, showing $13,049 million in cash and $12,367 million in corporate borrowings as of March 31, 2023 | Item | March 31, 2023 (US$ millions) | December 31, 2022 (US$ millions) | | :--------------------------------------- | :---------------------------- | :----------------------------- | | Assets: | | | | Cash and cash equivalents | 13,049 | 14,396 | | Other financial assets | N/A | 26,899 | | Accounts receivable and other | N/A | 30,208 | | Inventory | N/A | 12,843 | | Equity accounted investments | N/A | 47,094 | | Investment properties | N/A | 115,100 | | Property, plant and equipment | N/A | 124,268 | | Intangible assets | N/A | 38,411 | | Goodwill | N/A | 28,662 | | Deferred income tax assets | N/A | 3,403 | | Total Assets | N/A | 441,284 | | Liabilities: | | | | Corporate borrowings | 12,367 | 11,390 | | Accounts payable and other | 58,760 | 57,941 | | Non-recourse borrowings | 210,460 | 202,684 | | Subsidiary equity obligations | 4,098 | 4,188 | | Deferred income tax liabilities | 24,143 | 23,190 | | Equity: | | | | Non-controlling interests in net assets | 102,851 | 98,138 | | Preferred equity | 4,103 | 4,145 | | Common equity | 39,960 | 39,608 | | Total Liabilities and Equity | 456,742 | 441,284 | - The balance sheet remains conservatively capitalized, with a weighted-average term of 12 years, and no maturities until 2024[19] Liquidity and Investment Activities During the quarter, Brookfield invested $1.2 billion of balance sheet capital, maintaining significant group-wide liquidity of $113 billion, and holding $9.4 billion in accumulated unrealized carried interest - During the quarter, $1.2 billion of balance sheet capital was invested into businesses to grow operations[5] - Significant group-wide liquidity of $113 billion, including $33 billion of cash, financial assets, and undrawn credit lines, was available at the Corporation and its affiliates[19] - Total accumulated unrealized carried interest stands at $9.4 billion, a 2% increase during the quarter, with an expectation to realize over $500 million this year, including a recent hospitality investment sale for over $800 million, returning a 2x multiple of capital[18] Shareholder Returns Brookfield returned $404 million to shareholders during the quarter through regular dividends and share repurchases, having repurchased $746 million of Class A shares over the last twelve months - Returned $404 million to shareholders through regular dividends and share repurchases during the quarter[5] - Repurchased $746 million of Class A shares in the open market over the last twelve months[5] Consolidated Financial Statements The consolidated financial statements present Brookfield's Q1 2023 performance, balance sheet, and reconciliation of net income to distributable earnings, alongside earnings per share Consolidated Statements of Operations For the three months ended March 31, 2023, Brookfield Corporation reported consolidated revenues of $23,297 million and net income of $424 million, with $120 million attributable to Brookfield shareholders | (US$ millions, except per share amounts) | 2023 (Q1) | 2022 (Q1) | | :--------------------------------------- | :-------- | :-------- | | Revenues | 23,297 | 21,882 | | Direct costs | (17,632) | (16,884) | | Other income and gains | 381 | 29 | | Equity accounted income | 429 | 843 | | Interest expense – Corporate borrowings | (136) | (117) | | Interest expense – Non-recourse borrowings | (2,685) | (2,021) | | Fair value changes | 38 | 1,780 | | Depreciation and amortization | (2,188) | (1,811) | | Income tax | (274) | (708) | | Net income | 424 | 2,960 | | Net income attributable to Brookfield shareholders | 120 | 1,359 | | Non-controlling interests | 304 | 1,601 | Consolidated Balance Sheets As of March 31, 2023, Brookfield's consolidated balance sheet shows total assets and liabilities of $456,742 million, with cash and cash equivalents of $13,049 million and non-recourse borrowings of $210,460 million | Item | March 31, 2023 (US$ millions) | December 31, 2022 (US$ millions) | | :--------------------------------------- | :---------------------------- | :----------------------------- | | Assets: | | | | Cash and cash equivalents | 13,049 | 14,396 | | Other financial assets | N/A | 26,899 | | Accounts receivable and other | N/A | 30,208 | | Inventory | N/A | 12,843 | | Equity accounted investments | N/A | 47,094 | | Investment properties | N/A | 115,100 | | Property, plant and equipment | N/A | 124,268 | | Intangible assets | N/A | 38,411 | | Goodwill | N/A | 28,662 | | Deferred income tax assets | N/A | 3,403 | | Total Assets | N/A | 441,284 | | Liabilities: | | | | Corporate borrowings | 12,367 | 11,390 | | Accounts payable and other | 58,760 | 57,941 | | Non-recourse borrowings | 210,460 | 202,684 | | Subsidiary equity obligations | 4,098 | 4,188 | | Deferred income tax liabilities | 24,143 | 23,190 | | Equity: | | | | Non-controlling interests in net assets | 102,851 | 98,138 | | Preferred equity | 4,103 | 4,145 | | Common equity | 39,960 | 39,608 | | Total Liabilities and Equity | 456,742 | 441,284 | Reconciliation of Net Income to Distributable Earnings The reconciliation details adjustments from Q1 2023 net income of $424 million to distributable earnings before realizations of $945 million and total distributable earnings of $1,157 million | (US$ millions) | 2023 (Q1) | 2022 (Q1) | 2023 (LTM) | 2022 (LTM) | | :----------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Net income | 424 | 2,960 | 2,659 | 11,572 | | Equity accounted fair value changes and other items | 804 | 226 | 2,418 | 1,293 | | Fair value changes | (38) | (1,780) | 2,719 | (4,837) | | Depreciation and amortization | 2,188 | 1,811 | 8,060 | 6,738 | | Deferred income taxes | (92) | 425 | (326) | 1,446 | | Non-controlling interests in the above items | (2,222) | (2,413) | (10,304) | (11,383) | | Realized disposition gains in fair value changes or prior periods | 116 | 368 | 651 | 1,505 | | Less: total disposition gains | (212) | (356) | (977) | (1,617) | | Less: realized carried interest, net | (206) | (128) | (633) | (620) | | Cash retained in the business | 183 | (166) | 45 | (423) | | Distributable earnings before realizations | 945 | 947 | 4,312 | 3,674 | | Realized carried interest, net | 206 | 128 | 633 | 620 | | Disposition gains from principal investments | 6 | 107 | 259 | 663 | | Distributable earnings | 1,157 | 1,182 | 5,204 | 4,957 | | (US$ millions) | 2023 (Q1) | 2022 (Q1) | 2023 (LTM) | 2022 (LTM) | | :--------------------------------------- | :-------- | :-------- | :--------- | :--------- | | Asset management | 678 | 714 | 2,921 | 2,827 | | Insurance solutions | 145 | 13 | 520 | 42 | | BEP | 105 | 100 | 405 | 385 | | BIP | 80 | 75 | 305 | 282 | | BBU | 9 | 6 | 36 | 24 | | BPG | 145 | 220 | 826 | 820 | | Other | (35) | (34) | (50) | (94) | | Operating businesses (subtotal) | 304 | 367 | 1,522 | 1,417 | | Corporate costs and other | (182) | (147) | (651) | (612) | | Distributable earnings before realizations | 945 | 947 | 4,312 | 3,674 | | Realized carried interest, net | 206 | 128 | 633 | 620 | | Disposition gains from principal investments | 6 | 107 | 259 | 663 | | Distributable earnings | 1,157 | 1,182 | 5,204 | 4,957 | Earnings Per Share For the three months ended March 31, 2023, Brookfield Corporation reported basic earnings per share of $0.84 and diluted earnings per share of $0.81, with $79 million net income available to common shareholders | (US$ millions) | 2023 (Q1) | 2022 (Q1) | 2023 (LTM) | 2022 (LTM) | | :------------------------------------------------ | :-------- | :-------- | :--------- | :--------- | | Net income attributable to shareholders | 120 | 1,359 | 817 | 4,090 | | Preferred share dividends | (41) | (37) | (154) | (148) | | Dilutive effect of conversion of subsidiary preferred shares | — | — | — | (15) | | Net income available to common shareholders | 79 | 1,322 | 663 | 3,927 | | Dilutive impact of exchangeable shares of affiliate | — | 2 | — | 4 | | Net income available to common shareholders including dilutive impact of exchangeable shares | 79 | 1,324 | 663 | 3,931 | | Metric | Q1 2023 | | :--------------------------------------- | :------ | | Basic EPS | 0.84 | | Diluted EPS | 0.81 | | Metric | Q1 2023 | Q1 2022 | LTM 2023 | LTM 2022 | | :--------------------------------------- | :------ | :------ | :------- | :------- | | Diluted earnings per share | 0.05 | 0.81 | 0.42 | 2.45 | Non-IFRS and Performance Measures This section defines key non-IFRS financial metrics, including Distributable Earnings (DE), Funds from Operations (FFO), Net Operating Income (NOI), and Realized Carried Interest and Disposition Gains Distributable Earnings (DE) Definition Distributable Earnings (DE) is a non-IFRS measure representing earnings available for distribution or reinvestment, defined as the sum of various income streams net of corporate costs and preferred dividends - DE is defined as the sum of distributions from asset management, distributable operating earnings from insurance solutions, distributions from investments, realized carried interest, and disposition gains from principal investments, net of corporate activities, preferred share dividends, and equity-based compensation costs[38] - DE before realizations refers to DE before realized carried interest and realized disposition gains from principal investments[38] - These measures provide insight into earnings received by the company that are available for distribution to common shareholders or to be reinvested into the business[38] Funds from Operations (FFO) Definition Funds from Operations (FFO) is defined as net income attributable to shareholders adjusted for non-cash items and including realized disposition gains, while Operating FFO further refines this to core operating cash flows - FFO is defined as net income attributable to shareholders prior to fair value changes, depreciation and amortization, and deferred income taxes, and includes realized disposition gains not recorded in net income as determined under IFRS, and the company's share of equity accounted investments' FFO on a fully diluted basis[71] - Operating FFO represents the company's share of revenues less direct costs and interest expenses; excludes realized carried interest and disposition gains, fair value changes, depreciation and amortization and deferred income taxes; and includes our proportionate share of FFO from operating activities recorded by equity accounted investments on a fully diluted basis[40] Net Operating Income (NOI) Definition Net Operating Income (NOI) in real estate represents revenues from operations less direct expenses before depreciation, serving as a key indicator of operating performance and trends in occupancy and rental rates - NOI refers to revenues from operations less direct expenses before the impact of depreciation and amortization within the real estate business[41] - NOI is a key indicator of the ability to impact operating performance, reflecting trends in occupancy rates and rental rates by excluding non-recurring items and depreciation and amortization of real estate assets[41] Realized Carried Interest & Disposition Gains Definition Realized Carried Interest is the contractual share of investment gains from private funds, while Realized Disposition Gains from principal investments are considered normal business operations, adjusted for prior fair value changes - Realized Carried Interest represents the contractual share of investment gains generated within a private fund after considering clients' minimum return requirements, determined on third-party capital no longer subject to future investment performance[60] - Realized Disposition Gains from principal investments are included in DE and FFO as the purchase and sale of assets from directly held investments is considered a normal part of the company's business[45][83] - Realized disposition gains include gains and losses recorded in net income and equity in the current period, adjusted to include fair value changes and revaluation surplus balances recorded in prior periods[45][83] Corporate Information and Disclaimers This section provides an overview of Brookfield Corporation's strategic objectives, outlines forward-looking statement disclaimers, and lists additional information and contact details About Brookfield Corporation Brookfield Corporation aims for 15%+ annualized shareholder returns by compounding capital through disciplined investments across asset management, insurance, and operating businesses, supported by a strong balance sheet - Brookfield Corporation aims to compound capital over the long term to earn an annualized return of 15%+ for shareholders[37] - The company employs a disciplined investment approach, leveraging global reach and flexible capital to identify proprietary value opportunities, and utilizes deep operating expertise to grow cash flows and create value[58] - Capital is invested across three businesses: Asset Management, Insurance Solutions, and Operating Businesses, generating substantial and growing free cash flows, underpinned by a conservatively capitalized balance sheet[68] Forward-Looking Statements and Risks The news release contains forward-looking statements subject to inherent risks and uncertainties, cautioning against undue reliance and disclaiming any obligation to update such information - The news release contains 'forward-looking information' and 'forward-looking statements' that are predictive in nature and depend upon or refer to future events or conditions[47] - Readers should not place undue reliance on forward-looking statements due to known and unknown risks, uncertainties, and other factors beyond the company's control, which may cause actual results to differ materially[49] - The company undertakes no obligation to publicly update or revise any forward-looking statements, and past performance is not indicative nor a guarantee of future results; targeted returns and growth objectives are for illustrative purposes only and are not assured[43][64][75] Additional Information and Contacts Additional Q1 2023 financial information, earnings call details, and contact information for media and investor relations are available on Brookfield Corporation's website - Investors, analysts, and other interested parties can access Brookfield Corporation's 2023 First Quarter Results, Shareholders' Letter, and Supplemental Information on the company's website[56] - Details for the Quarterly Earnings Call, including pre-registration and webcast links, are provided for participation[82] - Contact information for Communications & Media (Kerrie McHugh Hayes) and Investor Relations (Linda Northwood) is available[67]